Organizations as psychopaths

First, we start with the latest psychopathic organization in the news: Penn State. Officials chose self aggrandizement over protecting children from being raped by a predator, according to an unsurprising report by independent investigators hired by the state attorney general, as everyone on earth probably knows by now.

We recall hearing that, when hit with a similar assessment, the LA Archdiocese powers focused on duking it out with their insurer — rather than, oh, say, making sure this whole thing doesn’t happen again or empowering nuns or anything. We guess that in Pennsylvania, despite the window dressing, the whole matter is turned over to the accountants to come up with a number.

But this is all really just a distraction from the point: psychopathic organizations have no backstop — except maybe each other.

What organizations are psychopathic?*

Individual workplace psychopaths have been written about for the lay reader (e.g., Snakes in Suits, No A-Hole Rule), but social science research as to organizational psychopathy has been less forthcoming. Why would a psychopathic organization want to be labeled as a psychopathic organization? Does any psychopath ever want to be labeled as such or do they want to be labeled as “normal” while keeping their psychopathy a secret? So we query the premise of working with corporations to begin with.

But, on the off chance that an organization is so inclined, how do you measure the quantity of psychopathy of an overall organization?

The renown Dr. Hare, of the psychopathy scale fame, now puts forth a business psychopathy scale prototype, the “B-Scan 360” that is “. . an instrument that uses ratings of others to measure psychopathic features in workplace settings [with a study where] large samples of participants used an online survey system to rate their supervisors on the B-Scan 360. . . ”

Now, if you don’t know, the way to play the corporate “360” review is that you get together and agree who is going to be your “rater” and who will give you good ratings. If you are the supervisor, you tell your favored employees who to get for their review, and who to avoid — but, if they screw up and have negative ratings, you ignore those anyway. The whole thing is gimmicky and designed for management self-protection. (As are most management assessment tools in our opinion). And so, while we see the need for a “B-360″ assessment tool, even if large numbers of people phone it in, so what? They will do what’s in their own best interest because, after all, the corporation is a psychopath. While we appreciate the attempt to legitimize the concept of “corporate psychopathy”, we wouldn’t be surprised if it’s same ol’ same ol’. Sorry doctors.

And so, even though one could go one-by-one to suss out the individual psychopathic organizations, we’d just as soon skip that part. We think that it’s the financial services that is the drop of mercury that taints all those tins of corporate tuna.

With massive financial deregulation, and massive incentive to gamble, the incentives are skewed: companies aren’t incented to actually run their business for long-term success, but are geared toward being the modality of short-term trading profits. Or M&A fees. So — not giving a crap about widgets or employees but rather only making money for bankers (and their hangers-on) — every company of a certain size has to be a psychopathic organization.

Now, we don’t mean be a quote financial unquote blog.** Nevertheless, we plonk out our manifesto on a manual Royal typewriter by candlelight from our scrap wood and corrugated tin shack out in Fringeblogostan. It makes us feel better, anyway, even if not directly on point as far as the biology of dysfunctional behavior. As we said in 2009:

Normally, with separation of powers and all, when the executive branch fails, and the legislative branch fails, you go to the third branch: the judiciary.

But the court isn’t working. Why? Because it’s the Delaware Chancery court, full of those play-dough amorphous corporate “business judgment” mumbo jumbo decisions. We need to temporarily Federalize Delaware and send all the corporate governance cases up to the SDNY, let Judge Kimba Wood handle these like she handled the Milken case. Forget it, she even married into the mob.

Now when even the third branch isn’t working you go to populist opinion and get the electorate riled up so they throw the bums out. And that is why I’m posting all this stuff. Either the political sphere needs to clean it up or else let the populist opinion fall where it may.

Actually, two of our favorite financial bloggers, Ms. Smith and Mr. Taibbi, were on a PBS show with host Bill Moyers (video below, see at 24:25 where Mr. Moyers talks about sociopathic behavior. ) While they express incredulity and urgency, we feel they were restrained. Maybe there’s something of a fraud fatigue going on, after all it’s fraud after fraud. Nevertheless, Ms. Smith and Mr. Taibbi both said the financials services were basically the mob but not in jail — we AGREE all caps. As far as we can see, the financial service industry — now with no backstop against acting badly — is the like the mob on steroids.

They go through all the rackets (muni bonds, mortgage derivatives and related fraud, interest rate swaps — you name it) and now, the LIBOR scandal is front and center. We’ve now seen the price fixing of the LIBOR rates to make them lower, so that banks didn’t have to pay out true interest rates to their investors (and we’re freaked out about it). Anyway, turns out they messed with other banks. Bad move, LIBOR alleged co-conspirators. Plus, they screwed over states and municipalities — that need moola to fund their pensions because they were screwed over before. Don’t think that LIBOR alleged co-conspirators will be able to flip a Facebookish IPO to pay everyone off this time around.

RICO laws (Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U. S. C. §§1961–1968) are for the racketeers. Basically, the loaded terms are “persons” conducting an “enterprise” with a “pattern of racketeering activity,” and by two “predicate acts” in 10 year period, to vastly oversimplify. Mail or wire fraud, or forging documents can be predicate acts for the financial Gambinos. (In our biopharma lifetime, your loyal bloggist has been on both ends of civil RICOs both accusing and being accused of lying twice in the mail). There are also some state RICOs.

But, it may be that the banks themselves are starting to eat their own: IN RE: LIBOR-BASED FINANCIAL INSTRUMENTS. ANTITRUST LITIGATION, MDL No. 2262, otherwise known as the full employment for lawyers suit. (See this usefully interesting piece of law firm advertising). The designation “MDL” indicates multidistrict litigation, and this is one ginormous enchalada of a lawsuit combining all 21+ pissed-off parties and all alleged LIBOR co-conspirators. Sort of like the wrestling smack down in a single ring. We note that this whole thing started with a bunch of lawsuits last year some time, but only now being bundled up and hitting the main stream — perhaps that’s because the judge refuses to throw out the suits and looks like it’s going to wrestlemania. From what we gather, the big-ticket claim is antitrust violations, for conspiracy or price fixing. (Where’s the RICO?) Add to this potentially individuals (E&O insurers hang on to your hat) that could be on the hook. Then, jumping into the fray wearing gold spangled lycra are disgruntled ex-employees — the fired traders. ***

It will be interesting to see if this LIBOR megasuit puts all the psychopaths into the ring to battle it out, or if they could possibly cut a deal.

* In our view, any time a small group of like people (white middle aged men, for instance) gets in a small room and makes secret rules, it’s psychopathic. In part this may have to do with the biology of having a bias toward your “in-group” versus an “out group” as some of the behavioral economists have studied who screws over whom. More later on this.

***Disclaimer, disclaimer, not legal or any kind of advice of any sort, you all know the drill. At any rate, the disgruntled ex-employees remind us of one of our favorite wrestling moves, the one when two wrestlers are in the ring and a third jumps the ropes and grabs the other two by their forelocks and smacks their heads together. We note that wrestling entertainers at least have codes of conduct, and so are much more moral than financial services.